Curious just how we were 100% certain that the June 29 summit was an epic disaster, in addition to the obvious? Because in a note from that morning we said the following: "Below is Goldman's quick take on the E-Tarp MOU (completely detail-free, but who needs details when one has money-growing trees) announced late last night. In summary: "We recommend being long an equally-weighted basket of benchmark 5-year Spanish, Irish and Italian government bonds, currently yielding 5.9% on average, for a target of 4.5% and tight stop loss on a close at 6.5%." By now we hope it is clear that when Goldman's clients are buying a security, it means its prop desk is selling the same security to clients." Sure enough, its prop desk was selling, and selling, and selling. Since then Spain and Italy have blown out, and only the strange tightening in Ireland has prevented yet another stop loss from the squid which is now known for cremating clients more than anything else. The stop loss is certainly not far: the basket is now at 6.20%, and has just 30 bps to go until yet another batch of Goldman clients is slaughtered. Which is now only a matter of time - Goldman just told its clients it has a little more of its 5 Year exposure left to sell, and then it will be done. Of course by then another muppet murder scene will have to be cordoned off.

From Goldman's Francesco Garzarelli:

Trading in Thin Markets

Translating these considerations into an investment strategy has been admittedly difficult and contentious, given the prevailing pessimism and caution, and very thin markets.

We have observed in previous notes that the co-movement in EMU bonds has been looser this year, providing interesting entry points into trades within the area. More broadly, however, the extremely low levels of yields in AAA issuers (relative to macro fundamentals) can be traced back to the shifts in demand that are taking place within the fixed income universe in response to the displacements originating from the Euro area as a whole. Hence, a macro view on US Treasuries or German Bunds can be invalidated by changes in expectations on the policy reaction of Euro area authorities (we seldom find ourselves discussing GDP or inflation outlook in meetings with investors, as the discussion is dominated by considerations on the political economy of the crisis).

A few weeks ago, we recommended going long an equally-weighted portfolio of 5-year government bonds of Italy, Spain and Ireland. The trade is now slightly in the red relative to where we initiated our recommendation (6.20%, from 5.96%), reflecting the sell-off in Spain. Nevertheless, in addition to fitting with our more strategic views expressed above, we still like the position, for the following reasons.

First, the increase in short-dated yields in the south of the Euro area creates a problem for the transmission of monetary policy. We doubt that the ECB is insensitive to this and would view measures directed at supporting the private nonfinancial sector as more likely. In turn, these should help the government sector and lead to a decline in short-term rates.

Second, Spain and Italy are large government bond markets (their combined float is close to US$3trillion). We are of the view that the policy preference is to keep these markets open, rather than have these issuers become shut out of the primary market and unable to return, as is the case for the program countries now (although Ireland and Portugal are trying to re-activate some primary issuance). As we said since the start of last year, the intermediate-to-long maturities for both issuers are hard to invest in until some clarity is provided on how the debt overhang will ultimately be addressed. As said above, we expect some combination of EFSF/ESM intervention, and ECB assistance.

Recommended Tactical Trading Views

The following trading ideas from the Global Markets Group reflect shorter-term views, which may differ from the longer-term ‘structural’ positions included in our ‘Top Trades’ list further below.

On Rates:

Stay long an equally-weighted basket of benchmark 5-yr Spanish, Irish, and Italian government bonds opened at 5.96% on 29 June 2012, with a target of 4.5% and stop on a close above 6.5% now at 6.20%.

it does sound a bit like "don't worry, we know that the ECB is going to help. wink, wink." the fact that the Holy Vampire Squid still has clients is a wonderful testimony to human greed... getzeephyz, getzeegold...

The last time I asked the obvious question "Where do they find these suckers?" I received the answer OPM. But I mean, come on. Even OPM has limits.. For fuck's sake, you can't lose every trade and still have clients, can you?

they could have stopped all of this and tanked the nyse. they could have launched us into the stone age and launched the reset now, as opposed to painfully later on. hackers these days are concerned with becoming the new rich/elite. they control the future and they aren't concerned with carrying the idiots anymore. it seems no one does. the idiots aren't just on their own, they are loathed.

Why hasn't a single congressman investigated Goldman's rigging? oh wait...Goldman contributes money to their re-election stash so all these congressmen are prostitutes of Goldman. Never mind...rally on....until the printing stops and the can can't be kicked anymore, It's all Bullshit!

I don't think Clint Eastwood would even attempt that......seems crazy.

It's halftime in America.....you don't try to be heroic until the last 2 minutes of the 4th quarter.....plenty of time left but don't expect any help from Congress......cause that's just not going to happen.

dear your excellency our most exalted President of the European Council,

I know that your products are of the highest quality.

First, your job is to be our non-voting primus inter pares in the Council. Your non-votes are of premier quality.

Second, your job is also to be the most useless president of history. This, you do wonderfully, in fact you don't start wars, don't send soldiers, don't do anything of worth. Well done! I appreciate that, keep up the good work!

Third, your job is to give a human face to the Council - this unknown-in-the-Anglosphere body that ultimately governs the EU. Your face is perfect for this. Let it be known in all realms that we europeans like our politicians uglyness! Your second-in-command, the Baroness, is a good match to you.

Fourth, I really loved it when the Council last met and gave you a job. Wonderful! Everyone in the Council is a frigging Head of Government and has full staffed ministries at their command, but they gave you homework and you wrote the most useless half a page like the good puppet you are.

Herman Van Rompuy, I'd like to thank you. With you on the helm, we have achieved what we wanted: an EU president utterly devoid of power.

As soon as the crisis is over, we'll give you a medal and scrap your office.

I'll give the central planners one thing: Rumpy-pumpy was an excellent choice to put an innocuous face on an evil empire! Even Big Ears, across the pond, gets people all fired up -- notwithstanding that he has spent more time on the golf course than most of his subjects have spent at actual jobs.

the EU is not an empire, it's one flank of the empire. unless you are trying to argue that the US and the Greater Commonwealth is just a jumble of pastures full of the most peaceful sheep of all times

which post? or, better, which redirection?

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btw, I've found an earlier "in defence of Herman Achille" I have done in March, here 2229617 , there I wrote:

...then you haven't met Jan Peter Balkenende, the Dutch gentlemen who voted on behalf of the Netherlands for Rompuy, who is something like the permanent secretary of the Council, official title: "President of the European Council".

it's a one-country one-vote and the person has to be: 1) boring, 2) experienced (it has to be a former Prime Minister) and it has to have the 3) trust of the heads of governments who meet and form the European Council, that is nothing more than a bloody summit of governments.

I personally think Herman Van Rumpuy fits perfectly, he has been voted to the Belgian Parliament, he has been chosen to head the Belgian Government and he can be trusted to keep his mouth mostly shut and not to do anything the Council does not want. Because his job is mostly not doing anything without consultation of the Council anyway.

Goldman has no clients. Only "private" public pension fund managers that are more then happy to permit Goldman to insert it's blood funnel in deep on a wink and promises of V.P. status at the firm for service well done after a few years. What clients?

"I believe that banking institutions are more dangerous than standing armies... if the American People ever allow private banks to control the issue of currency... the banks and corporations that will grow up around them will deprive the people of their property until their children wake up homeless on the continent their fathers conquered." Thomas Jefferson, 1743-1826